Shares in Gome Electrical Appliances continued their slide in Hong Kong today, falling by another 2-percent. That’s after its parent announced it would be closing down several shops in Hong Kong.
China’s largest home appliance and consumer electronics retailer Gome says it will transition from its retail business in Hong Kong to bulk trade.
The electronics retailer marched into the Hong Kong market back in 2003 and soon gained popularity amongst local consumers thanks to its competitive prices.
However, analysts say the planned closure of Gome stores in Hong Kong reflects several headwinds facing local electronics retailers. Intense competition, rising wages, soaring rental costs and simply a waning interest in Gome products are all reasons for the cutback.
Kowk Ka-Yin, independent analyst, said, "The decision reflects the fierce competition in the consumer electronics market. Some investors may think investing in the Mainland and Hong Kong will encounter the same situation."
In addition, some local industry insiders say Gome’s supermarket business model is not a good fit for the Hong Kong market,
The electronics retailer has only 6 stores in Hong Kong, with just a third of that operating at peak level. The remaining stores will start to close down in February and March. Analysts estimate Gome has lost some 200 million Hong Kong dollars, or 26 million U.S. dollars in its nine-year operation in the city.